The escalating condo crisis swamping the city and its surroundings shows little sign of slowing
The pre-construction condominium model, a longstanding fixture in Toronto’s real estate development process, is under increasing scrutiny as sales volumes decline and inventory levels grow.
In the second quarter of 2024, the Greater Toronto Area recorded over 25,000 unsold pre-construction condo units. This follows a steep drop in sales to levels not seen since the mid-1990s.
According to Diana Mok, professor of real estate at the University of Guelph, this slowdown exposes vulnerabilities in a system where the majority of new condo units — roughly 70% to 80% — are typically sold before construction begins.
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Mok, who teaches at the Gordon S. Lang School of Business and Economics, said this trend has created a disconnect between housing supply and affordability. While the units remain available, many potential buyers remain priced out of the market.
“Amid the housing crisis,” Mok told Guelph Today. “Toronto is seeing a housing paradox in the condo market: pre-construction condos are unsold, while unaffordability keeps households priced out.”
The appeal of pre-construction units has traditionally rested on lower entry prices compared to market-ready properties and staggered payment schemes. Buyers often make deposits in phases, sometimes over several years, which can reduce initial financial pressure.
Consumer protections exist through the Ontario Condominium Act, which mandates that deposits be kept in trust.
Yet this arrangement also places a significant portion of financial risk on the buyer rather than developers or lenders. Mok noted that pre-construction condos, often small in size, are more attractive to investors than to households seeking permanent residences.
She attributed some of the pricing issues in the housing market to speculative practices tied to pre-construction projects. These activities, she said, have caused prices to rise beyond what many end-users can afford, with impacts felt across other housing categories.
One area of concern involves the role of real estate brokers. Mok suggested that current obligations under the Trust in Real Estate Services Act may not go far enough in addressing information gaps. She said prospective buyers should have a clearer understanding of the risks involved when purchasing unbuilt units.
The slowing momentum in pre-construction sales is raising questions about the future of the model. As the market adjusts, developers, regulators, and buyers may need to reconsider how housing is financed, marketed, and delivered in one of Canada’s largest urban regions.
